Stitched Together: Managing Your Organization as a System – Jan 2021

So last week we learned that the COVID-19 variant first discovered in the UK may, in fact, be more deadly than the original virus.  (Don’t worry: this article is not about the pandemic.)  I’m not a virologist, but to me, this is simply the virus mutating to try to sustain itself – to spread more quickly and more effectively from host to host.  Self-preservation.  Of course, humans will eventually react with tweaks to the vaccines to stay a step ahead.  An action getting a reaction, which causes a different action and eventually a different reaction. Whack-a-mole. Which got me thinking about a completely unrelated current event (during the pandemic, we seem to have a lot more time for random thinking)…

We’ve learned a lot about our system of government the last few months, certainly more than I remember learning in high school civics classes.  For better or worse, most of us now know the ins and outs of the impeachment process, how presidential pardons work, and my goodness do we know the details of our how our election system works – a general election leads to state certifications that leads to the electoral college vote that leads to the Congressional confirmation – the scene of the forever-remembered January 6 insurrection.  (Don’t worry: this article isn’t about politics either.)  It’s about process.  And when parts of the process seem to break down, we see the need to “tighten up” the system – close loopholes, improve election integrity.  Congress is already considering election reforms to improve the system.

What do these two things have in common – COVID-19 mutating and election reform?  On the surface, seemingly nothing.  But they are both complex systems.  And today we’re learning a lot about how both systems work – and how they can be changed and improved.

A system is “a group of interacting or interrelated entities that form a unified whole. A system, surrounded and influenced by its environment, is described by its boundaries, structure and purpose and expressed in its functioning.”

Most things on earth (in the universe, actually) are part of larger systems. Think about it:

• In the human body, various systems work together to sustain life.  For example, the cardiovascular system (with the heart, veins, arteries, and blood) carries oxygen and nutrients throughout the body; the neurological system supports movement, response to stimulus, and decision making; the digestive system (mouth, esophagus, stomach, intestines, etc.) supports digestion, bringing fuel to the body; and so forth.  If any one of these systems (or any part of any one of these systems) is not working properly, the body suffers disease, disability, or some form of sub-optimization that affects lifestyle or life in general.
• In nature, there are numerous systems.  Ecosystems have various elements, such as air, water, movement, plants, and animals that work together to survive or perish.  Weather systems have components such as atmospheric pressure, wind, temperature, humidity, and precipitation that interact to create weather at any given moment.  The solar system consists of the sun, nine (or eight) planets and their moons, and millions of asteroids, comets, and meteoroids all held together by the sun’s gravity and all interacting on each other.
• In automobiles, various systems work to enable the car to operate – the fuel system, the transmission system, the braking system, the heating/cooling system, the GPS navigation system, and so forth.  All parts of the car work in combination to allow the vehicle to operate, and if any one of them fails, the car will not perform (or not perform well).

And there are transportation systems (such as the highway system, the rail system, aviation systems), telecommunication systems, the Dewey Decimal system, and information systems.  There are river systems, energy (and utility) systems, food chain systems, and the educational system.  There are economic systems (the monetary system, the stock markets and trading systems, the tax system), military systems, and social systems.

I’m sure you get the point.  Most things in our surroundings (maybe everything) is part of a system. And “systems thinking,” then, is the process of understanding how things influence one another within a whole.

In organizations, systems consist of people, information, and processes that work together to make an organization healthy (or unhealthy), to create certain results and outcomes, and to accomplish mission and strategic objectives.

Organizational systems theory dates back several decades, traced to early work of experts such as Deming, Ackoff, Senge, and Wheatley, among others.  Collectively, these experts believed that organizations were highly complex systems, and that managers should therefore manage organizations as systems rather than only focusing on its individual parts.  In fact, these experts believed managers should view problems as parts of an overall system, rather than only reacting to specific events, failures, or process breakdowns (the result of which could contribute to unintended consequences).

I’m sure you’ve seen examples of myopic thinking within organizations.  Take, for instance, an organization that introduces a new product without fully considering the impact on existing products?  Or a certain engineering team reacting to a design defect by changing a spec, but not considering what impact that might have on the overall product performance (quality, warranty claims, customer complaints in the call center)?  Or managers who change a staffing schedule because of workforce shortages without considering customer traffic patterns or the impact on direct customer service?

A systems perspective is based on the belief that the component parts of a system can best be understood in the context of relationships with each other and with other systems, rather than in isolation.  And a systems perspective focuses on cyclical, rather than linear, cause and effect relationships within and between systems (other organizations).  Since all processes are part of a system, every action has a reaction – either positive or unintendedly negative.

This is where I believe many organizations struggle: they don’t have the measurement systems or the general perspective to understand how certain decisions create impacts within and outside the organization and/or how changes to parts of the system impact (positively or negatively) other parts of the system.  Surgeons would never just start cutting on various body parts without considering the impact on the heart, brain, and other various organs and systems!  So why do managers sometimes make changes to processes, technology, workforce policy, customer-facing processes, and so forth without first gathering requirements and then studying the impacts of various potential changes to the system?

I believe that successful management of overall organizational performance requires synthesis, alignment, and integration of the organization’s various parts.  According to the Baldrige Framework:

• “Synthesis” means looking at your organization as a whole and building on key organizational attributes, including core competencies, strategic objectives, action plans, and work systems.
• “Alignment” means using the key linkages between areas of an organization – between its leadership system, planning process, customer focus processes, workforce processes, operations, and other processes – to ensure consistency of plans, processes, measures, and actions.  The result of better alignment is more predictable and ever-improving outcomes.
• “Integration” builds on alignment, so that the individual components of an organization’s performance management system operate in a fully interconnected manner and deliver anticipated results.

For an organization, then, having a systems perspective means several things:

• that senior leaders seek to understand and balance the needs of various stakeholders.
• that work systems leverage core competencies and involve various parts of a supply network in a coordinated, integrated way.
• that resources are allocated to address the most significant strategic challenges and to achieve the most important strategic objectives – that there is focus on the “right” things.
• that senior leaders monitor, respond to, and manage performance based on data – on results; in fact, that workers are all levels of an enterprise use measures, indicators, and organizational knowledge to make decisions and to improve the processes used throughout the system.
• that organizations can learn: they operate as a closed loop systems, where data and information inform decision making so that processes can be adjusted, strategies can be “course-corrected,” and core competencies can be fully leveraged.

In essence, a systems perspective means managing your whole organization, as well as its individual components, to achieve better outcomes.

But that is hard to do, because 1) most of us were never trained in systems theory and really don’t have the tools to manage organizations as systems, and 2) systems are inherently complex and our brains, as powerful as they are, are wired to handle comprehension of only parts of systems rather than viewing things in three, four, and five dimensions (recall Senge’s “Fifth Dimension” book? – that was all about systems thinking).  Furthermore, systems usually continue to evolve and shift – like the mutating COVID-19 virus – so understanding systems is about anticipating a moving target.

So what are managers to do?  It sounds a little self-serving, but enlightened leaders from higher performing organizations (or at least those who aspire to be higher performing) use organizational assessments based on validated best practices to diagnose their systems – to verify what is working well in their systems and to identify and prioritize opportunities for improvement.  Much like an annual physical for your organization, these assessments uncover blind spots, redirect resources, inform planning, and refocus efforts on the most important areas of your organizational system.

There are many such diagnostics out there, but PEN offers three assessments based on the proven “Criteria for Performance Excellence” of the Baldrige Performance Excellence Program:

• the comprehensive MN/SD/ND Performance Excellence Award (that offers a very thorough evaluation of your system with teams of trained Evaluators) – this offers the deepest, richest learning experience for the organization and its leaders, and motivates sustained improvement at all levels of the enterprise.  PEN’s Award assessments are now offered in three different options, creating a gradual pathway to start small and grow into more complex/thorough evaluations.
• a Consultative Assessment (which leverages management experts, who help leaders identify their organization’s improvement opportunities) – this is a “short cut” assessment, but still helps leaders identify where they should focus their organizational energy.
• a self-assessment called First Step (which finds strengths and improvement opportunities through the collective lens of an organization’s leadership team) – this is the quickest and easiest assessment, which provides a roadmap for immediately improving organizational performance.

All three assessment processes are based on a validated set of best practices from leading organizations across the US; all three are diagnostic in nature and help inform leaders of where in their system they need to focus their attention and resources; all three promote organizational learning; and all three assist leaders with resource optimization, process improvement, and improved and sustained results.

More information on all three assessment options is here.

So the bottom line is this: your organization is a complex system, filled with hundreds – if not thousands – of independent work systems and processes, each designed to produce a set of outputs that presumably move the organization forward.  To manage and improve – or at least to better understand – the dynamics of your organization, leaders should have a framework to put those processes into context within the larger system, so that resources are optimized, negative consequences are minimized, and results are improved and sustained.

Part of PEN’s mission is to help leaders better understand their systems so that performance excellence can be achieved.  The first step is to take the first step and commit to learn more.  All stakeholders in your system – your customers, workers, owners, partners – would benefit from that seemingly “little” decision.  If you want to learn more about the Baldrige Framework – a systems view of understanding, managing, and improving organizations to reach and sustain higher performance – consider attending PEN’s “Principles of Performance Excellence: Baldrige 101” February 2 and 9 (two half-day morning online workshops).  The event is nearly sold out, so act today.  Information here.  The next offering of this valuable workshop will be June 1 & 8, also online.

What other insights do you have regarding performance excellence and managing your organization as a system? Participate in a discussion on this topic: visit our LinkedIn group to post a comment.  And follow me on Twitter @LassiterBrian!

Stay healthy and never stop improving!

Brian S. Lassiter

President, Performance Excellence Network

www.performanceexcellencenetwork.org

Catalyst for Success Since 1987! Photo credit http://psychology.iresearchnet.com/, mfe.govt.nz, Centre for Systems Studies